PHOENIX, May 09, 2023 (GLOBE NEWSWIRE) -- Mesa Air Group, Inc. (NASDAQ: MESA) today reported second quarter fiscal 2023 financial and operating results.

Fiscal Second Quarter Update:

Total operating revenues of $121.8 million
Pre-tax loss of $37.2 million, net loss of $35.1 million or $(0.88) per diluted share
Adjusted net loss¹ of $21.3 million or $(0.53) per diluted share
Adjusted net loss excludes $13.8 million primarily related to impairment of assets held for sale
Initiated CRJ-900 transition to United Airlines in March, with last American Airlines flight operated April 3^rd
Experiencing pilot attrition below pre-COVID levels
Reduced debt by approximately $80 million primarily with proceeds from asset sales

Jonathan Ornstein, Chairman and CEO, said, "While our financial results reflect the ongoing transition of CRJ flying to United, we believe these actions will prove to be the right long-term strategic decision for the company. We began operating CRJ-900 flights for United Airlines in March, representing the culmination of months of diligent preparation and coordination between Mesa and United teams. We have already started to realize significantly improved pilot retention and attraction as a result of our expanded agreement with United. While we were ultimately more conservative in the timing of our transition than we had projected through second-quarter end, we have now transitioned 24 CRJ-900s."

Fiscal Second Quarter Details:

Total operating revenues in Q2 2023 were $121.8 million, a decrease of $1.4 million, or 1.1%, from $123.2 million for Q2 2022. Contract revenue decreased $8.2 million, or 7.3%. These decreases were driven by deferred revenue and lower block hours, partially offset by higher United block-hour rates for new pilot payscales. Pass-through revenue, driven by maintenance and property taxes, increased by $6.8 million. Mesa's Q2 2023 results include, per GAAP, the deferral of $5.7 million, versus the recognition of $0.8 million of previously deferred revenue in Q2 2022. The remaining deferred revenue balance of $24.5 million will be recognized as flights are completed over the remaining term of the United contract.

Total operating expenses in Q2 2023 were $148.7 million, a decrease of $19.3 million, or 11.5%, versus Q2 2022. This decrease was primarily due to $22.7 million lower non-cash impairment of assets held for sale versus Q2 2022, an $8.6 million decrease in aircraft rent attributable to the reclassification from operating lease to finance lease for certain CRJ-900s, and a $4.2 million decrease in depreciation primarily driven by the lower depreciable base from the CRJ-900 asset impairment charge in Q4 2022. The decrease was partially offset by a $12.4 million increase in flight operations expense to $54.8 million, reflecting higher pilot pay scales and increased training costs as we continue to drive pilot throughput, as well as a $5.7 million increase in general and administrative expense, reflecting higher pass-through property tax costs. Total adjusted operating expenses, excluding one-time items, were $132 million, an increase of 2.7% compared to the prior year period.

Mesa's Q2 2023 results reflect a net loss of $35.1 million, or $(0.88) per diluted share, compared to a net loss of $42.8 million, or $(1.19) per diluted share for Q2 2022. Mesa's Q2 2023 adjusted net loss¹ was $21.3 million, or $(0.53) per diluted share, versus an adjusted net loss¹ of $10.3 million, or $(0.29) per diluted share, in Q2 2022.

Mesa's Adjusted EBITDA¹ for Q2 2023 was $7.1 million, compared to $15.8 million in Q2 2022, and Adjusted EBITDAR¹ was $7.9 million for Q2 2023, compared to $25.2 million in Q2 2022.

Operationally, the Company reported a controllable completion factor of 99.6% for United and 99.8% for American during Q2 2023. This is compared to a controllable completion factor of 96.7% for United and 96.8% for American during Q2 2022. This excludes cancellations due to weather and air traffic control.

With respect to a total completion factor that includes all cancellations, Mesa reported a total completion factor of 98.5% for United and 94.7% for American during Q2 2023. This is compared to a total completion factor of 93.7% for United and 93.5% for American during Q2 2022.

For Q2 2023, 55% of the Company's total revenue was derived from our contracts with United, 40% from American, 4% from DHL, and 1% from leases of aircraft to a third party. Upon our completion of the transition of the American CRJ-900s to United, our contracted regional fleet will consist of 80 large (70/76 seats) jets, comprising a mix of E-175s and CRJ-900s. Additionally, we will continue to operate four 737-400/800s at DHL.

Balance Sheet and Cash Flow:

Mesa ended the quarter at $51.4 million in unrestricted cash and equivalents. As of March 31, 2023, the Company had $608.7 million in total debt secured primarily with aircraft and engines.

During the quarter, the Company closed on the sale of 4 of the 11 CRJ-900s agreed to be sold to a third-party. Mesa also sold to United the remaining eight CRJ-550s and ten out of the 30 engines previously agreed upon. Net proceeds from these transactions were used to pay down $52 million of debt. Additionally, we made $28 million of scheduled debt payments in the quarter.

Conference Call Details:

Mesa Air Group will host a conference call with analysts on May 9^th at 4:30 pm EDT. The conference call number is 888-469-2054 (Passcode: Phoenix (7463649)). The conference call can also be accessed live via the web by visiting https://investor.mesa-air.com.

A recorded version will be available on Mesa's website approximately two hours after the call for approximately 14 days.

About Mesa Air Group, Inc.

Headquartered in Phoenix, Arizona, Mesa Air Group, Inc. is the holding company of Mesa Airlines, a regional air carrier providing scheduled passenger service to 105 cities in 42 states, the District of Columbia, the Bahamas, Cuba, and Mexico as well as cargo services out of Cincinnati/Northern Kentucky International Airport. As of March 31, 2023, Mesa operated or leased a fleet of 109 aircraft with approximately 325 daily departures and 2,388 employees. Mesa operates all of its flights as either American Eagle, United Express, or DHL Express flights pursuant to the terms of capacity purchase agreements entered into with American Airlines, Inc. and United Airlines, Inc. and a flight service agreement with DHL.

Forward-Looking Statements

Certain statements contained in this press release that are not historical facts contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to the "safe harbor" created by those sections. Forward-looking statements can be identified by the use of words such as "estimate," "anticipate," "expect," "believe," "intend," "may," "will," "should," "seek," "approximate" or "plan," or the negative of these words and phrases or similar words or phrases. Forward-looking statements, by their nature, involve estimates, projections, goals, forecasts and assumptions and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. For more information on risk factors for Mesa Air Group, Inc.'s business, please refer to the periodic reports the Company files with the Securities and Exchange Commission from time to time. These forward-looking statements herein speak only as of the date of this press release and should not be relied upon as predictions of future events. Mesa Air Group, Inc. expressly disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein, to reflect any change in Mesa Air Group, Inc.'s expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except as required by law.

Contact:

Mesa Air Group, Inc.

Media

Media@mesa-air.com

Investor Relations

Doug Cooper

investor.relations@mesa-air.com


MESA AIR GROUP, INC.
Consolidated Statements of Operations and Comprehensive (Loss) Income
(In thousands, except per share amounts) (Unaudited)

	Three Months Ended March 31							Six Months Ended March 31
		2023			2022				2023				2022
Operating revenues:
Contract revenue (2023—$52,399 and $111,769	$	103,782		$	111,988			$	232,232			$	248,882
and 2022—$48,295 and $110,880 from related
party)
Pass-through and other revenue		18,052			11,225				36,776				22,088
Total operating revenues		121,834			123,213				269,008				270,970

Operating expenses:
Flight operations		54,830			42,410		113,150					90,008
Maintenance		45,985			47,357					94,272		106,338
Aircraft rent		835			9,434					4,918		19,020
General and administrative		13,538			7,860					27,526		20,438
Depreciation and amortization		16,541			20,747					31,744		41,775
Impairment of assets held for sale		16,743			39,475					20,462		39,475
Other operating expenses		233			685					1,359		2,657
Total operating expenses		148,705			167,968				293,431				319,711
Operating income (loss)		(26,871	)		(44,755	)			(24,423		)		(48,741	)

Other income (expense), net:
Interest expense		(13,030	)		(8,120	)			(24,306		)		(16,050	)
Interest income		49			42				120				93
Gain on investments, net		2,095			(2,261	)			416				(8,723	)
Other income (expense), net		538			(71	)			955				(130	)
Total other income (expense), net		(10,348	)		(10,410	)			(22,815		)		(24,810	)
Income (loss) before taxes		(37,219	)		(55,165	)			(47,238		)		(73,551	)
Income tax expense (benefit)		(2,097	)		(12,382	)			(3,027		)		(16,494	)
Net income (loss)	$	(35,122	)	$	(42,783	)		$	(44,211		)	$	(57,057	)

Net income (loss) per share attributable to common shareholders
Basic	$	(0.88	)	$	(1.19	)		$	(1.16		)	$	(1.58	)
Diluted	$	(0.88	)	$	(1.19	)		$	(1.16		)	$	(1.58	)

Weighted-average common shares outstanding
Basic		39,932			36,048				38,135				36,005
Diluted		39,932			36,048				38,135				36,005

MESA AIR GROUP, INC.
Consolidated Balance Sheets
(In thousands, except shares) (Unaudited)
	March 31, 2023		September 30, 2022
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	51,428	$	57,683
Restricted cash		3,144		3,342
Receivables, net		9,924		3,978
Expendable parts and supplies, net		26,754		26,715
Prepaid expenses and other current assets		6,341		6,616
Total current assets		97,591		98,334

Property and equipment, net		868,027		865,254
Intangible assets, net		—		3,842
Lease and equipment deposits		1,686		6,085
Operating lease right-of-use assets		11,593		43,090
Deferred heavy maintenance, net		9,532		9,707
Assets held for sale		40,530		73,000
Other assets		26,398		16,290
TOTAL ASSETS	$	1,055,357	$	1,115,602

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current portion of long-term debt and finance leases ($30,630 and $0 from related party)	$	145,046	$	97,218
Current portion of deferred revenue		5,174		385
Current maturities of operating leases		5,562		17,233
Accounts payable		48,480		59,386
Accrued compensation		9,745		11,255
Other accrued expenses		28,081		29,000
Total current liabilities		242,088		214,477

NONCURRENT LIABILITIES:
Long-term debt and finance leases, excluding current portion		463,646		502,517
Noncurrent operating lease liabilities		8,459		16,732
Deferred credits ($1,965 and $2,193 from related party)		3,300		3,082
Deferred income taxes		14,512		17,719
Deferred revenue, net of current portion		19,306		23,682
Other noncurrent liabilities		28,829		29,219
Total noncurrent liabilities		538,052		592,951
Total liabilities		780,140		807,428

STOCKHOLDERS' EQUITY:
Common stock of no par value and additional paid-in capital, 125,000,000 shares authorized; 40,619,274 (2023) and 36,376,897 (2022) shares issued and outstanding, 4,899,497 (2023) and 4,899,497 (2022) warrants issued and outstanding		270,432		259,177
Retained earnings		4,785		48,997
Total stockholders' equity		275,217		308,174
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,055,357	$	1,115,602

MESA AIR GROUP, INC.
Operating Highlights (unaudited)

	Three months ended
	March 31
	2023	2022	Change
Available seat miles (thousands)	1,065,771	1,616,896	-34.1%
Block hours	48,186	65,613	-26.6%
Average stage length (miles)	542	671	-19.2%
Departures	26,450	31,983	-17.3%
Passengers	1,545,489	1,921,635	-19.6%
Controllable completion factor*
American	99.76%	96.76%	3.1%
United	99.63%	96.71%	3.0%
Total completion factor**
American	94.68%	93.51%	1.3%
United	98.48%	93.74%	5.1%

*Controllable completion factor excludes cancellations due to weather and air traffic control

**Total completion factor includes all cancellations

¹Reconciliation of non-GAAP financial measures

Although these financial statements are prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP"), certain non-GAAP financial measures may provide investors with useful information regarding the underlying business trends and performance of Mesa's ongoing operations and may be useful for period-over-period comparisons of such operations. The tables below reflect supplemental financial data and reconciliations to GAAP financial statements for the three and six months ended March 31, 2023 and March 31, 2022. Readers should consider these non-GAAP measures in addition to, not a substitute for, financial reporting measures prepared in accordance with GAAP. These non-GAAP financial measures exclude some, but not all items that may affect the Company's net income or loss. Additionally, these calculations may not be comparable with similarly titled measures of other companies.

¹Reconciliation of GAAP versus non-GAAP Disclosures
(In thousands, except for per diluted share) (Unaudited)

	Three Months Ended March 31, 2023												Three Months Ended March 31, 2022
	Income (Loss) Before Taxes			Income Tax (Expense) Benefit			Net Income (Loss)			Net Income (Loss) per Diluted Share			Income (Loss) Before Taxes			Income Tax (Expense) Benefit			Net Income (Loss)			Net Income (Loss) per Diluted Share
GAAP income (loss)	$	(37,219	)	$	2,097		$	(35,122	)	$	(0.88	)	$	(55,165	)	$	12,382		$	(42,783	)	$	(1.19	)
Gain on investments, net		(2,095	)		139			(1,956	)	$	(0.05	)		2,261			(522	)		1,739		$	0.05
Deferred financing write-off on sale of assets		663			(44	)		619		$	0.02			-			-			-			-
Gain of disposal of fixed assets		(549	)		36			(513	)	$	(0.01	)		-			-			-			-
Asset Impairment		16,743			(1,112	)		15,631		$	0.39			39,843			(9,097	)		30,746		$	0.85
Adjusted income
(loss)		(22,457	)		1,117			(21,340	)	$	(0.53	)		(13,061	)		2,763			(10,298	)	$	(0.29	)
Interest expense		13,030												8,120
Interest income		(49	)											(42	)
Depreciation and amortization		16,541												20,747
Adjusted EBITDA		7,065												15,764
Aircraft rent		835												9,434
Adjusted EBITDAR	$	7,900											$	25,198

	Six Months Ended March 31, 2023												Six Months Ended March 31, 2022
	Income (Loss) Before Taxes			Income Tax (Expense)Benefit			Net Income (Loss)			Net Income (Loss) per Diluted Share			Income (Loss) Before Taxes			Income Tax (Expense)Benefit			Net Income (Loss)			Net Income (Loss) per Diluted Share
GAAP income (loss)	$	(47,238	)	$	3,027		$	(44,211	)	$	(1.16	)	$	(73,551	)	$	16,494		$	(57,057	)	$	(1.58	)
Adjustments⁽^1)(2)(3)^{(4)(5)(6)(7)(8)}		20,160			(1,568	)		18,592		$	0.49			48,566			(11,089	)		37,477		$	1.04

Adjusted income
(loss)		(27,078	)		1,459			(25,619	)	$	(0.67	)		(24,985	)		5,405			(19,580	)	$	(0.54	)
Interest expense		24,306												16,050
Interest income		(120	)											(93	)
Depreciation and amortization		31,744												41,775
Adjusted EBITDA		28,852												32,747
Aircraft rent		4,918												19,020
Adjusted EBITDAR	$	33,770											$	51,767

(1)   $0.4 million impairment loss on operating lease right of use asset related to the abandonment of one the Company's leased facilities during the six months ended March 31, 2022.

(2)   $39.5 million impairment loss on held for sale accounting treatment on twelve (12) CRJ 900 aircraft during the six months ended March 31, 2022.

(3)   $8.7 million loss resulting from changes in the fair value of the Company's investments in equity securities for the six months ended March 31, 2022.

(4)   $16.7 million impairment loss on Held for Sale accounting treatment on seven (7) CRJ 900 aircraft during the six months ended March 31, 2023.

(5)   $3.7 million impairment loss on intangible asset during the six months ended March 31, 2023.

(6)   $0.5 million gain from sale of ten (10) engines during the six months ended March 31, 2023.

(7)   $0.7 million loss on deferred financing costs related to retirement of debts during the six months ended March 31, 2023.

(8)   $0.4 million gain resulting from changes in the fair value of the Company's investments in equity securities for the six months ended March 31, 2023.

Source: Mesa Air Group, Inc.

Mesa Air Group Reports Second Quarter Fiscal 2023 Results